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Most Common Trustee Mistakes

Trustees have a difficult job, to be sure, but they can make their job much harder by making mistakes. There are two big mistakes that many Trustees make consistently. First, many Trustees simply fail to communicate. Trustee are required to keep their beneficiaries reasonably informed about the Trust administration (Probate Code section 16060). Reasonable information will change depending on the circumstances. Generally speaking, Trustees should share financial information with the beneficiaries, provide a description of any major actions (such as the purchase or sale of Trust assets), discuss distribution plans, and provide income and tax information as soon as possible.

 

Communicating with beneficiaries can be done in writing, by text, email or regular mail, or through phone calls and in-person meetings. Of course, a reasonable Trustee is best advised to communicate in writing or follow up any oral communications with written confirmation so they have proof of the communication. Further, it is usually a good practice to share statements with Trust beneficiaries. Things like bank statements or brokerage account statements can easily be sent to the Trust beneficiaries to ensure they are reasonably informed about Trust activities.

Second, many Trustees fail to follow the Trust terms. Probate Code section 16000 requires the Trustee to administer the Trust as written. That means the Trustee must take all actions required under the Trust terms. It may sound simple to follow the Trust terms, yet many Trustees somehow manage to violate this duty.

For starters, the Trustee must review and understand the Trust document. That can be harder than you think because many Trust documents are written in legalese. If you need a law degree to understand your Trust document, then you may have a problem with the successor Trustee. To overcome this problem, Trustees are allowed to hire lawyers to advise them on Trust issues. And every Trustee should seek legal advice to ensure that they fully understand the Trust terms. Moreover, the Trustee must understand what actions to take to comply with the Trust terms.

Once the Trustee understands that actions that are required under the Trust document, then the Trustee must take all steps necessary to comply with the Trust terms. If the Trust requires that a house be sold and the proceeds distributed among the Trust beneficiaries, then the Trustee must take action to list the house for sale. The Trustee cannot stick his head in the sand and ignore the Trust terms.

If you can avoid these two mistakes, then you have a good chance of meeting your duties as Trustee.